Exclusive: Will the new Concorde Agreement survive scrutiny in Brussels?

NEWS STORY28/04/2014

In 2001 the FIA gave undertakings to the European Commission about its commercial and regulatory role in the Formula One World Championship. The agreement between the FIA and the Brussels Competition Directorate General was published in the Commission's Official Journal (pdf) on the June 13 2001.

The Commission's notice confirms that the FIA agreed to modify its arrangements "to establish a complete separation of the commercial and regulatory functions in relation to the Formula One World Championship and the FIA World Rally Championship where new agreements are proposed which place the commercial exploitation of these championships at arms-length". The Commission also noted that the FIA would "improve transparency of decision-making and appeals procedures, and to create greater accountability".

The document went onto to explain that the separation of commercial and regulatory functions would be achieved by using "arms-length commercial agreements which will provide for fixed payments to FIA". These fixed fees would pay for the FIA's fulfilment of its regulatory duties. The Commission also commented that; "As motor sport and especially formula one is a particularly complex technical activity requiring important investments in technological research and development it is indispensable for all participants to agree on the way the series are organised".

More than a decade later the FIA has accepted a new Concorde Agreement in which both the Federation and the smaller teams can be out voted in the F1 Strategy Group. This is what happened at the recent meeting in Bahrain where the FIA found it impossible to introduce a cost cap strongly supported by the smaller teams. By accepting a decision-making process that can be dominated by an alliance between the larger teams and the commercial rights holder the FIA appears to have weakened its regulatory power.

Despite this seemingly emasculated role are there other advantages for the FIA from the new Concorde Agreement? From an income point of view surely the answer is yes. In addition to fixed regulatory fees worth €14.8 million each year, the FIA has the option to buy, for a price of 460,000 US$ (nominal value), 1% of the shares and loan notes of Delta Topco (the estimated market value of which is approximately $70m) if and when CVC decides to sell.

It might be argued that the FIA has traded a diminution in its regulatory influence for a commercial stake in the future floated F1 company. Whether or not this arrangement is consistent with the FIA's existing undertakings to the European Commission is a matter for competition lawyers and perhaps (the smaller) F1 teams to explore.